Exhibit 10.7
WATER PURCHASE CONTRACT RBS-2A
THIS WATER PURCHASE CONTRACT is made this 25th day of September, 2003 by
and between the New Jersey Water Supply Authority (the "Authority"), an
instrumentality of the State of New Jersey created pursuant to the provisions of
the New Jersey Water Supply Authority Act, P.L. 1981, C. 293, as amended,
N.J.S.A. 1B ss.58:1B-1 et seq. and Middlesex Water Company ("Middlesex"), a
corporation existing under the laws of the State of New Jersey (also referred to
herein as "the Purchaser").
BACKGROUND
Pursuant to the Authority Act, the Authority was established for the
express purpose of operating water supply facilities, including those water
supply facilities theretofore operated by the State. In accordance with the
Authority Act, the Authority operates, inter alia, the System.
In connection with the operation of the System, the Authority, both in its
own right and as the successor to the water supply facilities of the State, is a
party with various System Water Purchasers, including the Purchaser, to Existing
Contracts pursuant to which the Authority makes water available for purchase by
such System Water Purchasers.
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The Authority contemplates from time to time, undertaking various
improvements to the System and in connection therewith, expects to adopt a
Resolution which will authorize, inter alia, the issuance of Bonds for the
purpose of making funds available to finance various projects for the System.
Pursuant to a Bond Resolution, certain of the revenues received by the Authority
from System Water Purchasers will be pledged by the Authority to pay the
principal of and interest on Bonds.
The parties hereto are entering into this Contract, which is one of
several Water Purchase Contracts to be entered into by the Authority with System
Water Purchasers, in order (i) to supercede the Existing Contracts between the
Authority and the Purchaser and (ii) to provide for the sale to and purchase of
water by the Purchaser consistent with the Purchaser's projected needs.
NOW THEREFORE, in consideration of the mutual covenants and premises
herein contained, the parties hereto, intending to be legally bound hereby,
agree as follows:
SECTION 1. Definitions.
Unless the context clearly establishes otherwise, the following terms,
when used in this Contract or in the Background hereto, shall have the following
meanings:
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"Annual Budget" means the annual budget of the Authority relating to the
System (which shall include all costs, obligations and expenses properly
allocable to the System in accordance with generally accepted accounting
principles and cost allocation principles), as amended or supplemented, adopted
or in effect for a particular Fiscal Year.
"Annual Payment" means the aggregate amount projected by the Authority to
be payable to the Authority by the Purchaser for Uninterruptible Service during
each Annual Payment Period, which Annual Payment shall be determined by (a)
multiplying the applicable rates and charges for Uninterruptible Service set
forth in the Rate Schedule in effect during the relevant Annual Payment Period
by the number of MG of water contracted for by the Purchaser for Uninterruptible
Service on an annual basis as set forth in this Contract, subject to adjustment
to reflect any special allocations, charges, credits or adjustments provided for
pursuant to the provisions of this Contract or any Rate Schedule, which may
include but not be limited to: (i) adjustments based upon the water being
derived from the System within the Delaware River Basin; (ii) debt service
allocated specifically to those customers of the Authority who benefit from the
debt to which such debt service relates; and (iii) for withdrawals within the
Raritan Basin, an evaluation of
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the equivalent sustained supply and the application of an appropriate production
factor, all as contemplated by and/or set forth in the Rate Schedule and (b)
adding thereto any charges for access to the System and any other charges
imposed on the Purchaser by this Contract.
"Annual Payment Period" means the calendar year, commencing January 1,
2004 during which Uninterruptible Service is to be provided to the Purchaser
hereunder.
"Annual Requirements" means the aggregate amount required during each
Annual Payment Period to pay, or make provision for, all (i) Operation and
Maintenance Expenses; (ii) Debt Service; and (iii) other requirements of the
System required to be paid as is set forth in the Resolution, or in any Rate
Schedule, or in any documents relating to Other Indebtedness, including but not
limited to amounts required to meet the rate covenant set forth in Section 713
of the Resolution; provided, however, that the amount to be included for Debt
Service in each Annual Payment Period shall be that amount accruing in the Bond
Year or Bond Years, or corresponding portion thereof, commencing during the
Fiscal Year within which such Annual Payment Period or portion thereof falls.
"Authority" means the New Jersey Water Supply Authority established
pursuant to the Authority Act.
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"Authority Act" means the "New Jersey Water Supply Authority Act", P.L.
1981, c.293, as amended (N.J.S.A. 58:1B-1 et -- seq.).
"Authorized Officer" means the Chairman, Vice Chairman, Treasurer,
Secretary or Executive Director of the Authority or any person or persons
designated by the Authority to act on behalf of the Authority.
"Bonds" means all bonds, notes or other evidences of indebtedness issued
by the Authority and outstanding under the Resolution and each Supplemental
Resolution to finance or refinance any cost, expense or liability paid or
incurred or to be paid or incurred by the Authority in connection with the
financing, planning, designing, constructing, acquiring, operating or
maintaining of any part of the System.
"Bond Year" means, with respect to any Bonds, the twelve-month period (and
such shorter initial period, if any) established with respect to the issuance of
such Bonds in a Supplemental Resolution, and with respect to Other Indebtedness,
the twelve-month period (and such shorter initial period, if any) established
with respect to the issuance of such Other Indebtedness in the documents
relating to the issuance of such Other Indebtedness.
"Credit Facility" means a policy of municipal bond insurance, a letter of
credit, a surety bond, a loan agreement, a standby bond
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purchase agreement or other type of credit agreement, facility, insurance or
guaranty arrangement pursuant to which funds can be obtained to pay the
principal or redemption price of Bonds or Other Indebtedness and interest
thereon.
"Debt Service" for any period means, as of any date of calculation, with
respect to (A) Outstanding Bonds, an amount equal to the sum of (i) the interest
accruing during such period on such Bonds, and (ii) that portion of the
principal of such Bonds accruing during such period, all as is set forth in the
Resolution and (B) Other Indebtedness, an amount equal to (i) the interest
accruing during such period on such Other Indebtedness and (ii) that portion of
the principal accruing on such Other Indebtedness during such period, all as is
set forth in the documents relating to the issuance of such Other Indebtedness.
"Department" means the New Jersey Department of Environmental Protection.
"Division" means the Water Supply Administration in the Department.
"Event of Default" means a default by the Purchaser of the provisions of
this Contract as a result of the occurrence of any of the events set forth in
Section 10 hereof.
"Existing Contracts" means the existing water use contracts
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for the System between the Authority and System Water Purchasers covering the
provisions of water from the System.
"Fiscal Year" means the twelve-month period commencing on July 1 of each
year and continuing through the following June 30.
"Force Majeure" means acts of God, strikes, lockouts or other industrial
disturbances; orders of the Government of the United States or the State or any
agency or instrumentality thereof or of any civil or military authority; acts of
terrorism, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, storms, floods, washouts, droughts and explosions; breakage
or accidents to machinery, pipelines, dams or canals, other than as a result of
the negligence of the party claiming inability to comply with its obligations;
partial or entire failure of water supply, other than as a result of the
negligence of the party claiming inability to comply with its obligations;
arrests, civil disturbances; acts of any public enemy; and any other events not
reasonably within the control of and not as a result of the negligence of the
party claiming inability to comply with its obligations.
"GPM" means gallons of water per minute.
"General Fund" means the fund denominated as such and created pursuant to
the Resolution.
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"Liquidity Facility" means an irrevocable letter of credit or other
irrevocable Credit Facility issued by a financial institution or insurance
company, which letter of credit or Credit Facility is payable on demand in the
event the terms under which such letter of credit or Credit Facility was issued
require payment thereunder.
"Major Rehabilitation Fund" means the fund denominated as such and created
pursuant to the Resolution.
"MG" means million gallons of water.
"MGD" means million gallons of water per day.
"Minimum Dependable or Safe Yield" means that amount of water, from time
to time determined by the Authority in accordance with applicable laws or
regulations and presently estimated to be 225 MGD, which the System is capable
of supplying continuously throughout a repetition of the most severe drought of
record.
"Monthly Water Payments" means either (i) the amount obtained by dividing
the amount of the Annual Payment for any Fiscal Year by twelve or (ii) such
other or different required monthly payments for which the Authority gives
notice to the Purchaser pursuant to Sections 4B, or 4E hereof.
"Operation and Maintenance Expenses" for any period means the amount (as
set forth in the Annual Budget of the Authority, as from time to time amended)
of all current costs, obligations and
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expenses of, or arising in connection with, the (i) operation, maintenance and
administration of the System, and minor additions or improvements thereof or
thereto, or (ii) performance of any Water Purchase Contract, including, but not
limited to, the items set forth herein below and items set forth in the
Resolution as Operation and Maintenance Expenses, in each case, to the extent
properly allocable to the System and, as applicable, determined on the cash
basis of accounting and/or in accordance with generally accepted accounting and
cost allocation principles:
(i) all repairs and ordinary replacements and reconstruction of the
System; all wages, salaries and other personnel costs, including costs of
pension, retirement, health and other employee benefit programs; all fuel,
utilities, supplies and equipment; and all supervisory, engineering,
accounting, auditing, legal and financial advisory services;
(ii) all taxes and payments in lieu of taxes;
(iii) all costs of insurance for the System, including any forms of
self insurance (or self insurance reserves) maintained by the Authority,
and payment of all claims not covered by the Authority's insurance;
(iv) all fees and expenses incurred in connection
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with any Credit Facility, Liquidity Facility, Reserve Account Credit
Facility, the issuance of any Bonds or the issuance of any Other
Indebtedness, and all fees and expenses of counsel, fiduciaries and others
in connection with any such Credit Facility, Liquidity Facility, Reserve
Account Credit Facility, Bonds or Other Indebtedness; provided, however,
that none of the foregoing shall be considered as Operation and
Maintenance Expenses to the extent required to be capitalized under the
Supplemental Resolution authorizing such Bonds or the documents
authorizing such Other Indebtedness or paid out of the proceeds of such
Bonds or Other Indebtedness;
(v) all amounts required, pursuant to applicable law, to be
deposited into the Rebate Fund;
(vi) all amounts required to be deposited, in accordance with the
Resolution, into any reserve fund established for Operation and
Maintenance Expenses; and
(vii) allowance for depreciation with respect to equipment and
property having a depreciable life of greater than three (3) years but
less than ten (10) years; and
(viii) any other costs, expenses or obligations required to be paid
by the Authority under the provisions of any Water Purchase Contract,
contract relating to the System,
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any agreement or instrument relating to the Bonds or Other Indebtedness or
by law;
"Other Indebtedness" means all bonds, other than the Bonds or other
obligations issued pursuant to the Resolution, notes or other evidences of
indebtedness issued by the Authority, and Outstanding, including financing
agreements and arrangements with the State, to finance or refinance any cost,
expense or liability paid or incurred or to be paid or incurred by the Authority
in connection with the financing, planning, designing, constructing, acquiring,
operating or maintaining of any part of the System; provided, however, that
Other Indebtedness shall not include obligations for supplies and services which
are to be paid by the Authority out of current revenues, or obligations under
leases which are not required to be capitalized under generally accepted
accounting principles.
"Outstanding" means (A) with reference to Bonds, as of any date, Bonds
theretofore or thereupon being authenticated and delivered under the Resolution
or any Supplemental Resolution except to the extent that any particular Bonds
are not deemed to be outstanding pursuant to the provisions of the Resolution
and (B) with respect to Other Indebtedness, such Other Indebtedness theretofore
or thereupon being authenticated and delivered pursuant
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to any documents relating to the issuance thereof except to the extent that any
particular Other Indebtedness is not deemed to be outstanding as specifically
provided therein.
"Overdraft Service" means (i) the supply of water from the System, to the
extent and from time to time available, in excess of aggregate Uninterruptible
Service, for certain, interim, interruptible, non-guaranteed uses which a System
Water Purchaser is authorized to withdraw pursuant to a Contract or (ii) such
other definition as is set forth in the Rate Schedule.
"Peaking Factor" means (i) the percentage equivalent of that volume of
Overdraft Service available from the System for a given period in excess of
Uninterruptible Service, which a customer may divert without charge or (ii) such
other definition as is set forth in the Rate Schedule.
"Point of Delivery" or "Point of Diversion" means the location where the
System, including surface and ground water supplies, interconnects with the
Purchaser's Interconnection System.
"Production Factor" means the inverse ratio between any upstream
allocation for a consumptive or depletive water diversion and its equivalent in
sustained supply at the confluence at the Millstone and Raritan Rivers as
follows: Production factor = Safe yield at the confluence / yield at the point
of diversion (see
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N.J.A.C. 7:11-2.8).
"Projected Annual Requirements" means the aggregate amount projected by
the Authority in its Annual Budget, as from time to time amended, to be required
during each Annual Payment Period to pay all Annual Requirements.
"Prudent Water Supply Practices" means, as of any particular time, any
practices, methods and acts engaged in or approved by a significant portion of
the water supply industry operating in areas having comparable characteristics
to those of the System, or any of the practices, methods and acts which, in the
exercise of reasonable judgment in the light of the facts known at the time the
decision was made, could have been expected to accomplish the desired result at
a reasonable cost consistent with good practices, reliability, safety and
expedition. Prudent Water Supply Practices are not intended to be limited to the
optimum practice, method or act, to the exclusion of all others, but rather are
intended to be a spectrum of possible practices, methods or acts expected to
accomplish the desired results.
"Purchaser" means the party to this Contract, which is purchasing water
from the Authority.
"Purchaser's Interconnection System" means the buildings, structures,
piping, valves, meters and other control apparatus and
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equipment, installed or to be installed by or on behalf of, and owned and/or
used by, the Purchaser (i) to connect Purchaser's system with the System at the
Point of Delivery and to withdraw, measure, control and monitor the flow and
quality of the water that the Purchaser withdraws from the System, and (ii) to
transport such water to the Purchaser's system.
"Rates" means the charges from time to time determined and established by
the Authority in accordance with the Rate Schedule.
"Rate Schedule" means the "Schedule of Rates, Charges and Debt Service
Assessments for the Sale of Water from the Delaware and Raritan Canal - Spruce
Run/Round Valley Reservoirs System" promulgated from time to time by the
Authority and set forth in the New Jersey Administrative Code, all in accordance
with applicable laws and regulations, as the same may from time to time be
amended, and in accordance with the provisions of the System Rules and
Regulations, which Rate Schedule establishes the rates, charges and debt service
assessments by the Authority for water derived from the System in accordance
with the following:
(a) Uninterruptible Service. The Rates per MG set forth in such Rate
Schedule for Uninterruptible Service shall be established for each Annual
Payment Period on the basis of:
(i) the Projected Annual Requirements for such Fiscal Year;
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(ii) multiplied by the production factor for the diversion;
(iii) divided by the lesser of: (a) the annualized amount of MGD of water
from the System during such Fiscal Year which the Authority determines is
available for Uninterruptible Service and for Standby Service or (b) the
annualized amount of MGD of water from the System which is required to be
provided by the Authority by the terms of all Water Supply Contracts for
Uninterruptible Service and for Standby Service in effect during such Fiscal
Year, in each case, times 365 (366 during a leap year); provided, however, that
the Authority may exclude for any period, for purposes of computation hereunder,
the Uninterruptible Service and Standby Service under any Water Purchase
Contract where an Event of Default has occurred and is continuing.
(b) Overdraft Service. The Rate(s) per MG for average daily diversions in
excess of the Peaking Factor during a calendar month and year shall be the
amounts set forth in the Rate Schedule.
(c) Short-term Service. The Rates for Short-term Service established for
each Annual Payment Period shall be the amounts set forth in the Rate Schedule.
(d) Standby Service. The Rates set forth in such Rate Schedule for Standby
Service shall be established for each Annual Payment Period on the basis of (i)
a standby charge for each month
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during which Standby Service is available, equal to the capacity, in MGD, of the
Purchaser's withdrawal facilities to be served by such Standby Service plus (ii)
a charge (against which the standby charge for such month shall be credited),
for water actually consumed in any month, at the rate per MG established by the
Rate Schedule for Uninterruptible Service.
(e) Special User Service. The Rates for Special User Service established
for each Annual Payment Period shall be the amounts set forth in the Rate
Schedule.
"Rebate Fund" means the fund denominated as such and created
pursuant to the Resolution.
"Reserve Account Credit Facility" means a surety bond, insurance
policy, letter of credit, line of credit or other Credit Facility satisfying the
requirements set forth in Section 518 of the Resolution.
"Resolution" means the resolution adopted by the Authority
authorizing the issuance of Bonds, and all Supplemental Resolutions.
"Revenue Fund" means the fund denominated as such and created
pursuant to the Resolution.
"Short-term Service" means (i) the supply of water from the System,
to the extent from time to time available, in excess of
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aggregate Uninterruptible Service, for certain interim, interruptible,
non-guaranteed or short-term uses, such as growing agricultural or horticultural
products, meeting extraordinary requirements in consumer demand for potable or
industrial water as a result of transfers arising from a declaration of drought
by the Department, meeting non-seasonal extraordinary requirements in consumer
demand for potable or industrial water, or emergent maintenance or temporary
failure of a critical component of a System Water Purchaser's infrastructure
which a System Water Purchaser is authorized to withdraw pursuant to a Contract
or (ii) such other definition as is set forth in the Rate Schedule.
"Special User Service" means the supply of water from the Raritan
River Basin, which a System Water Purchaser is authorized to continuously
withdraw, without interruption, to be returned by the Purchaser to the stream
channel of the System at a point reasonably considered by the Authority to be at
or in the near vicinity of the point of withdrawal, substantially undiminished
in quantity and not substantially degraded in quality, all as is determined by
the Authority.
"Standby Service" means the supply of water from the System for
certain occasional uses, such as fire protection or other emergencies, natural
or otherwise, which a System Water
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Purchaser is authorized to withdraw pursuant to a Contract.
"State" means the State of New Jersey.
"Supplemental Resolution" means any resolution enacted by the
Authority supplemental to the Resolution in connection with the issuance of any
particular Bonds, which Supplemental Resolution shall, inter alia, establish the
specific terms applicable to such particular Bonds.
"System" means the water supply system operated by the Authority
known as the Delaware and Raritan Canal - Spruce Run/Round Valley Reservoirs
System, and any expansion thereof, the major components of which presently
consist of the Delaware and Raritan Canal water supply transmission facility,
the Spruce Run and Round Valley Reservoirs and an interconnecting pumping
station located where the Raritan and Millstone Rivers meet adjacent to the
Delaware and Raritan Canal, together with all component plants, structures and
other real or personal property, and additions and improvements thereto,
necessary or useful and convenient for the accumulation, supply or transmission
of water including but not limited to: reservoir facilities, settling and
sediment storage basins, dams, dikes, intake and reservoir pipelines, force
mains, pump stations and intake structures.
"System Rules and Regulations" means the Rules for the
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Use of Water from the Delaware and Raritan Canal and Spruce Run/Round Valley
Reservoirs System, adopted on April 24, 1987 and effective on May 18, 1987 and
presently set forth in Section 7:11-3.1 et. seq. of the New Jersey
Administrative Code, and any amendments from time to time hereafter made
thereto.
"System Water Purchaser" means any party to a Water Purchase
Contract with the Authority.
"Uninterruptible Service" means the supply of water from the System
which a System Water Purchaser is authorized continuously to withdraw, without
interruption, for potable or industrial water supply purposes, pursuant to a
Contract.
"Water Act" means the "Water Supply Management Act", P.L. 1981, c.
262, as amended (N.J.S.A. 58:1A-1 et. seq.) and the rules promulgated
thereunder.
"Water Purchase Contracts" or "Contracts" means the contracts, and
all supplements thereto, providing for Uninterruptible, Short-term, Standby
Service or Special User Service with respect to water from the System to one or
more System Water Purchasers.
"Water Supply Plan Approval" means any approval by the Department of
the purchase of water from the System, whether in the form of a water supply
allocation permit, an interim approval of a
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water supply plan submitted as may be required by the Department for a water
supply allocation permit, or otherwise.
Except where the context otherwise requires, words importing the
singular number shall include the plural number and vice versa, and words
importing persons shall include firms, associations, corporations, districts,
agencies and bodies. Any capitalized term used herein and not otherwise defined
shall have the meaning set forth in the Resolution.
SECTION 2. Water Service To Be Provided
A. The Authority shall supply and make available for delivery to the
Purchaser, on and after the date hereof, and the Purchaser shall be entitled to
utilize the following water service, subject to the other terms and conditions
of this Contract and the System Rules and Regulations:
(i)(a) Uninterruptible Service in the amount of 27 MGD, which
is the average amount of Uninterruptible Service permitted to be withdrawn
by the Purchaser subject to the provisions of Section 2(B) hereof;
(b) Overdraft Service of that number of MGD necessary to
meet Purchaser's diversionary needs in excess of Uninterruptible Service.
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(ii) Short Term Service of that number of MGD which shall be
established by one or more separate agreements, which shall be
supplemental hereto and incorporated herein, between the Authority and the
Purchaser, entered into for such term as the Purchaser and the Authority
shall agree, with the number of MGD so established to be the maximum
amount of Short-term Service permitted to be withdrawn by the Purchaser in
any twenty-four (24) hour period during the period covered by such
separate and supplemental agreements except as otherwise limited by
Section 2B hereof;
B. Purchaser shall not withdraw water, in the aggregate for all
Uninterruptible Service provided hereunder, at rates greater than an average of
27 million gallons in any twenty-four (24) hour period; 822 million gallons per
month, which per minute, daily and monthly amounts shall be appropriately
adjusted to reflect fluctuations in water use; and an average of nine thousand,
eight hundred, and fifty-five (9,855) million gallons in any year from January
1, 2004 through November 30, 2023. The Purchaser shall immediately notify the
Authority of any such withdrawals in excess of said amount.
C. If the Authority determines that rationing the water derived from
the System is necessary by reason of drought
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conditions or an emergency, it shall allocate all available water first to
providing Uninterruptible Service under all Water Purchase Contracts, without
any preference or priority, except that the Authority, in its sole discretion,
may exclude Water Purchase Contracts where an Event of Default has occurred and
is continuing, at the Authority's election, unless the Authority, in accordance
with applicable law or regulation, is otherwise directed or required to allocate
water in a specific manner, (i) pro rata, in accordance with the volume of water
available, to each System Water Purchaser of Uninterruptible Service provided in
all Water Purchase Contracts then in effect; or (ii) pro rata in accordance with
the volume of water actually provided each System Water Purchaser of
Uninterruptible Service pursuant to Water Purchase Contracts during the last
preceding Annual Payment Period in which rationing of water was not necessary;
or (iii) upon such other basis as shall be, in the judgment of the Authority,
appropriate to distribute fairly among all System Water Purchasers of
Uninterruptible Service pursuant to Water Purchase Contracts, the burden of such
rationing. In the event that rationing is to be imposed by reason of an
emergency for more than a seven-day period, the Authority shall consult with and
give appropriate effect to the recommendations, if any, of the Department.
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D. If rationing is instituted, or if, other than as a result of an
Event of Default, the Authority does not provide to the Purchaser the amount of
water constituting Uninterruptible Service hereunder, or advises the Purchaser
that it will be unable to do so other than as a result of an Event of Default,
the Purchaser shall nevertheless at all times be required to pay for all water
from the System constituting Uninterruptible Service available for delivery to
the Purchaser.
E. If in the event of an emergency, the Purchaser is legally
restricted from purchasing all of the water constituting Uninterruptible Service
hereunder, the Purchaser shall only be required to pay for such water
constituting Uninterruptible Service as it is legally permitted to purchase (and
the Authority is able to supply) during the period of such emergency.
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SECTION 3. System Water Quality.
A. The water to be supplied by the Authority hereunder shall be raw,
untreated water which the Authority shall supply to all System Water Purchasers
without distinction as to source or quality variations of the water supplied and
subject to the hazards inherent in natural streams. THE AUTHORITY MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THE QUALITY OF ANY
WATER SUPPLIED OR THE CONDITION OF THE SYSTEM, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. However, the Authority,
based upon water quality data supplied to it by any System Water Purchaser or
other water quality data which may be obtained by the Authority, will take all
reasonable measures to determine the source of water degradation and will
exercise all appropriate administrative and legal rights under applicable law to
compel the Department to assure that the stream water quality is in compliance
with applicable stream standards.
B. (1) In the event of contaminant discharges, spills or runoff to
the Authority's water supplies which constitute an emergency and require
immediate action to maintain the supply of water from the System, the Authority
will take immediate corrective
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action either: (i) through requesting the appropriate agency to take such action
or, (ii) directly, by its own personnel and/or outside contractors, to contain
and, if necessary to remove such contaminants from the water supply, in the
Authority's sole discretion. In addition, to the extent it is legally able to do
so and it determines that such action is in the best interests of the Authority,
the Authority will seek to recover all costs and damages resulting from any such
incidents from the parties responsible.
(2) If the Authority and the Purchaser, at the request of the
Purchaser, agree that the quality of the water derived from the System is not of
sufficient quality to be treated by the Purchaser for the purposes for which
such water is to be used or there is any trend towards degradation of such water
as a result of contamination in the quality of water derived from the System,
the Authority and such Purchaser shall jointly (i) request the Department to
take appropriate action to implement corrective measures or (ii) take other
administrative or operational measures.
SECTION 4. Payment for Water Services
A. General. Purchaser agrees to make all payments for water services
available hereunder in the amounts, at the times and places and in the manner
provided herein subject to the Rate
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Schedule and as modified from time to time, by the System Rules and Regulations.
B. Purchaser agrees to pay Seller a rate equal to one-hundred
percent of the total rate set forth in such Rate Schedule for Uninterruptible
Service (see Section 2(A)(i)(a)) as illustrated in the following formula:
Uninterruptible Service * # of days in the month * rate;
C. Purchaser agrees to pay Seller a Monthly Overdraft Rate equal to
one-hundred and twenty percent of the total rate set forth in said Rate Schedule
for Uninterruptible Service (see Section 2(A)(i)(a)) for average daily
diversions for any calendar month in excess of a Peaking Factor of ten-percent
of Uninterruptible Service as illustrated in the following formula: actual
monthly diversion in excess of 10% of Uninterruptible Service * 1.20 * rate *
days in the month;
D. Purchaser agrees to pay Seller an Annual Overdraft Rate equal to
one-hundred and fifteen percent of the total rate set forth in said Rate
Schedule for Uninterruptible Service (see Section 2(A)(i)(a)) for average daily
diversion for any calendar year in excess of Purchaser's Uninterruptible Service
as illustrated in the following formula: average daily diversion in excess of
Uninterruptible Service * 1.15 * rate * days in the year.
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The annual overdraft period shall coincide with the calendar year;
E. Uninterruptible Service. Purchaser agrees to make Monthly Water
Payments for Uninterruptible Water Services no later than thirty (30) days from
the date of each billing by the Authority to the Purchaser. Except as
hereinafter provided, payments for Uninterruptible Service shall be based on the
number of days in each month, whether or not the Purchaser actually withdraws
the full amount of water available to it as Uninterruptible Service; provided,
however, that the Purchaser shall not be required to make payment for water that
the Authority does not make available to the Purchaser except where such
non-provision of water is as a result of an Event of Default. The Authority
shall notify the purchaser not later than thirty days prior to the beginning of
each Annual Payment Period of the amount of the Purchaser's Annual Payment for
Uninterruptible Service and the amounts of the Monthly Water Payments.
F. Short-term Service. Purchaser agrees to pay not later than thirty
(30) days from the date of each billing by the Authority to the Purchaser, the
charges for water actually consumed as Short-term Service in the immediate
preceding month.
G. Overdraft Payments. The Purchaser agrees to pay annually, the
charges for those diversions referenced in Sections
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4(C) and 4(D) above. The monthly overdraft payment will be remitted in November
of the year in which the overdraft occurs. The annual overdraft payment will be
remitted in February of the year following the year in which the overdraft
occurred.
H. Retroactive Debt Service Payment. The Purchaser agrees to pay to
the Authority the following additional amounts:
i. An amount equal to two million, two hundred and forty-five
thousand, six hundred and seventeen dollars and twenty-four cents
($2,245,617.24), which sum represents the retroactive payment of a full
proportionate share of the total annual payments of Debt Service for the 1958,
1969, and 1981 bonds made to the Authority by other purchasers of water from the
System during the periods from July 1, 1983 through June 30, 1988 (1958 bonds),
from July 1, 1988 through June 30, 2002 (1969 bonds) and from October 1, 1985
through December 31, 2003 (1981 bonds), for that certain 7 MGD of water
initially contracted for purchase by the Purchaser commencing on January 1,
2004. Purchaser shall receive a credit of three hundred two thousand, nine
hundred fifteen dollars and eighty-four cents ($302,915.84), representing the
total retroactive debt paid by Purchaser associated with 7 mgd of unsold water
as a prior system customer since 1983. Purchaser's adjusted retroactive debt
payment for the 1958, 1969, and 1981 bonds shall be one
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million, nine hundred and forty-two thousand, seven hundred and one dollars, and
forty cents ($1,942,701.40). Said payment is to be made on the first day of each
month in 238 equal monthly installments of eight thousand, one hundred and
twenty-eight dollars, and forty-six cents ($8,128.46) commencing March 1, 2004
and continuing through December 1, 2023 and one final payment of eight thousand,
one hundred and twenty-seven dollars, and ninety-two cents ($8,127.92) payable
on January 1, 2024; and
ii. An amount equal to one million, two hundred and eighty-seven
thousand, nine hundred and thirty-eight dollars and thirty-eight cents
($1,287,900.38), which sum represents the retroactive payment of a full
proportionate share of the total annual Debt Service payments for the 1988 Water
System Revenue Bonds made to the Authority by other purchasers of water from the
System during the period from July 1, 1989 through June 30, 1998 for that
certain 7 MGD of water initially contracted for purchase by the Purchaser
commencing on January 1, 2004. Purchaser shall receive a credit of one hundred
seventy-one thousand, nine hundred and forty-three dollars, and fifty-eight
cents ($171,943.58), representing the total retroactive debt paid by Purchaser
associated with 7 MGD of unsold water as a prior system customer since 1983.
Purchaser's adjusted retroactive debt payment for the
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1988 bond issue shall be one million, one hundred fifteen thousand, nine hundred
and fifty-six dollars and eighty cents. ($1,115,956.80). Said payments are to be
made on the first day of each month in 238 equal monthly installments of four
thousand, six hundred and sixty-nine dollars and twenty-eight cents ($4,669.28)
commencing March 1, 2004 and continuing through December 1, 2023, and one final
payment of four thousand, six hundred and sixty-eight dollars and sixteen cents
($4,668.16) payable on January 1, 2024; and
iii. An amount equal to five hundred and forty-four thousand,
eighty-four dollars and twenty-five cents ($544,084.25), which sum represents
the retroactive payment of a full proportionate share of the total annual
payments of Debt Service for the 1998 Water Surplus Revenue Refunding Bonds made
to the Authority by other purchasers of water from the System during the period
from July 1, 1999 through December 31, 2003 for that certain 7 MGD of water
initially contracted for purchase by the Purchaser commencing on January 1,
2004. Purchaser shall receive a credit of seventy-two thousand, six hundred and
thirty-nine dollars $72,639.00), representing the total retroactive debt paid by
Purchaser associated with 7 MGD of unsold water as a prior system customer since
1983. Purchaser's adjusted retroactive debt payment
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for the 1998 bond issue shall be four hundred and seventy-one thousand, four
hundred and forty-five dollars and twenty-five cents ($471,445.25). Said
payments are to be made on the first day of each month in 238 equal monthly
installments of one thousand, nine hundred and seventy-two dollars and
fifty-seven cents ($1,972.57) commencing March 1, 2004 and continuing through
December 1, 2023, and one final payment of one thousand, nine hundred and
seventy-two dollars and fifty-seven cents ($1,972.57) payable on January 1,
2024.
I. Production Factor Payments. The Rate Schedule and System Rules
provide that for a depletive diversion at any location above the confluence of
the Millstone and Raritan Rivers, the Total Daily Allotment Charge shall be
multiplied by the Production Factor, which is equal to System Safe Yield at the
point of delivery. The Purchaser agrees to a Production Factor of 1.000 for its
diversion and to pay the dollar equivalent to the Authority in Purchaser's
Monthly Water Payments for Uninterruptible Water Services.
J. Absolute Obligation. Purchaser's obligations hereunder to pay for
water in the manner set forth in this Contract shall be absolute and
unconditional, and shall not be affected by any failure by the Authority to
perform its obligations hereunder,
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other than a failure by the Authority to supply water constituting
Uninterruptible Service (in which event, as herein provided, Purchaser shall be
unconditionally obligated to pay for the water available for taking), except as
a result of an Event of Default, or be subject to any other defense or to any
reduction, whether by offset, counterclaim or otherwise, except for any
reductions or credits provided for herein, in the Rate Schedule or in the System
Rules and Regulations.
K. Overdue Payments. All payments for service which are not made by
the due date therefore and any other sums required to be paid by the Purchaser
to the Authority pursuant to this Contract shall bear interest at a per annum
rate equal to the prime rate, as from time to time established by Chase
Manhattan Bank as its prime rate (with any changes in such prime rate to be
effective on any date that such rate is changed) plus 2%, such interest to be
calculated from the due date of any required payment until actual payment
thereof.
L. Rate Adjustments and Procedures. The Authority reserves the right
from time to time to adopt adjustments to the Rate Schedule and to the System
Rules and Regulations in accordance with applicable laws and regulations. If as
a result of any such adjustments the payments for service hereunder are adjusted
by the
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Authority, the Authority shall notify the Purchaser of the adjustments and of
any revised schedule of Monthly Water Payments required to reflect such
adjustments and the same shall, without any further act of the Authority or the
Purchaser, constitute an amendment to this Contract.
SECTION 5. Delivery and Withdrawal of Water.
A. All water shall be withdrawn from the System at the Purchaser's
sole cost and expense. Title to all water supplied from the System shall be in
the Authority to the Point of Delivery, at which point title shall vest in the
Purchaser upon its withdrawal of such water.
B. The Authority hereby grants to the Purchaser for the term of this
Contract a right which shall permit access to Purchaser and its designated
representatives upon and over the System as may be necessary, at Purchaser's
sole cost and expense, to install and construct at the Point of Delivery, and to
replace, repair, operate and maintain, Purchaser's Interconnection System.
C. The Purchaser shall not install or construct nor make any
material alterations in Purchaser's Interconnection System without the prior
written approval of the Authority. Purchaser shall submit engineering plans
therefore to the Authority for its
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review and approval.
D. The Authority or its designated representatives shall have the
right at any time to examine Purchaser's Interconnection System from the Point
of Diversion to and including the flow meter or measuring devices (hereafter
"flow meters"). The Authority shall comply with all reasonable security
protocols developed by Purchaser in conducting its inspections. The Purchaser
shall, at its sole cost and expense, within ten (10) days (or such longer period
as may be required by law) after receipt of written demand from the Authority,
make such modifications or repairs to Purchaser's Interconnection System from
the Point of Diversion to and including the flow meters as, in the opinion of
the Authority, may be required to eliminate leakage of water from, or potential
damage to the System. If Purchaser should fail to make such modifications or
repairs, the Authority may do so and the Purchaser agrees to reimburse the
Authority on demand for the Authority's cost therefore.
E. The Purchaser shall purchase or construct, install, operate,
maintain and repair, as a part of Purchaser's Interconnection System, at its
sole cost and expense and in a manner which the Authority determines to be in
accordance with Prudent Water Supply Practices, automated flow meters at the
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point(s) of diversion that electronically transmit daily diversionary flow
information to the Seller, of the type and at location(s) approved by the
Authority. The Purchaser shall have such flow meters tested for accuracy at its
own sole cost and expense by a testing firm approved by the Authority (i) at
least once during each Fiscal Year; (ii) following meter repairs; and (iii) at
such other times as the Authority may reasonably request. Each test shall be
evidenced by a certified report, which Purchaser will cause such testing firm to
furnish to the Authority.
F. Monthly meter readings of water shall be taken by the Purchaser
on the last day of each month, or if such last day falls on Sunday or legal
holiday, on the first working day thereafter. The Purchaser shall keep a daily
record of flow rates and cumulative daily water withdrawal totals and shall
submit to the Authority, not later than the tenth (10th) business day of each
month, copies of such records for the preceding month. The Authority or its
designated representatives shall have the right at any time to examine the flow
meters or other measuring device, and any repairs or replacements made to such
flow meter or other measuring device. Purchaser shall submit written
certifications with its monthly meter readings.
G. The Purchaser agrees to indemnify, defend and hold
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harmless the Authority from and against all claims, damages or losses suffered,
sustained or required to be paid by the Authority, arising from any act or
omission of the Purchaser, its officers, agents, representatives or employees,
in connection with Purchaser's Interconnection System, the operation thereof, or
any activities carried out by the Purchaser, its officers, employees, agents or
representatives, on the premises of, or with respect to, the System, or with
respect to any of the services which are the subject of this Contract.
H. The Authority, subject to the provisions of the New Jersey Tort
Claims Act, shall be responsible and shall at its own expense, defend itself
against any and all suits, claims, losses, demands or damages of whatsoever kind
or nature, arising out of or in connection with any act or omission of the
Authority, its employees, agents or contractors, in performance of the
obligations assumed by the Authority pursuant to this Agreement. The Authority
hereby releases the Purchaser from any and all liabilities, claims, losses,
costs, expenses and demands of any kind or nature whatsoever, arising under the
state or federal law, solely out of or in connection with the Authority's
performance of the obligations assumed by the Authority pursuant to this
Agreement.
I. In the event that any of the flow meters
36
required to be maintained by the Purchaser shall fail to properly operate, the
Authority may make necessary estimates of or adjustments in accordance with the
System Rules and Regulations, to the amounts of water withdrawn by the Purchaser
and to be charged by the Authority to the Purchaser for any period during which
such failure exists and continues. The Purchaser agrees that at the request of
the Authority it will repair or replace such meters, at its sole cost and
expense. If the Purchaser fails to repair or replace the meters within 60 days
following notice from the Authority, the Authority, may suspend the withdrawal
of water by the Purchaser until such time as the meter is repaired or replaced;
provided, however, that the Purchaser shall be required to continue to honor its
payment obligations for water pursuant to this Contract during the period of
such suspension, as if such suspension had not occurred.
SECTION 6. Force Majeure.
If by reason of Force Majeure either the Authority or Purchaser
shall be rendered unable to satisfy its obligations under this Contract, in
whole or in part, and shall give notice and all of the particulars of such Force
Majeure in writing to the other such party hereto within a reasonable time after
the occurrence of the event or cause relied on, then the obligation of the party
37
giving such notice, to the extent affected by such Force Majeure, shall be
suspended during the continuance of such inability; provided, however, that the
existence of Force Majeure shall in no event affect the obligation of the
Purchaser to make the Monthly Water Payments and other payments required under
this Contract, but if less than the amount of water required to be supplied
hereunder is supplied or available for supply, nothing in this Section 6 shall
require the Purchaser to make payment for water other than in an amount equal to
the greater of (i) the water actually supplied or (ii) the water available for
supply by the Authority. Either party so affected shall use its best efforts to
remove or overcome such Force Majeure as quickly as is practicable.
SECTION 7. Term of Contract.
A. This Contract shall commence on January 1, 2004 and shall
continue until November 30, 2023 unless previously terminated as provided herein
as a result of an Event of Default, or extended as provided in Section 7B
hereof.
B. If the Purchaser desires to continue the withdrawal of water from
the System, contracted for pursuant to this Contract, beyond the date set forth
in Section 7A hereof, the Purchaser shall submit to the Authority notification
of intent to renew not less
38
than 90 days prior to such date.
C. If the Purchaser has not submitted a notification of intent to
renew as provided in Section 7B hereof, the Authority shall notify the Purchaser
of the expiration date of the Contract. If, after such notification by the
Authority, the Purchaser continues withdrawal of water, the charge for such
withdrawal shall be twice the rate per million gallons as is specified in the
Rate Schedule then in effect.
D. Within ninety (90) days after termination of this Contract, the
Purchaser shall remove from the System Purchaser's Interconnection System and
any other facilities installed by Purchaser on the System, shall restore the
System to its former condition as nearly as may be practicable and in a manner
satisfactory to the Authority and shall release and re-convey the rights granted
pursuant to Section 5B hereof. If Purchaser shall fail to remove and restore as
aforesaid, the Authority may make such removal and restoration at the sole cost
and expense of the Purchaser, which cost and expense shall be paid by the
Purchaser to the Authority on demand. The Authority further reserves the right
to remove and sell Purchaser's Interconnection System and other facilities to
the extent it deems appropriate.
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SECTION 8. Insurance
A. Authority Insurance. The Authority shall use reasonable
commercial efforts to purchase and carry fire, casualty, public liability and
other insurance on the System, or to otherwise establish and fund its own
self-insurance program or participate in any State-administered pooled risk or
self-insurance program, for purposes and in amounts which ordinarily would be
carried or funded by a person or entity owing and maintaining facilities similar
to the System.
B. Purchaser Insurance. The Purchaser shall use reasonable
commercial efforts to purchase and carry fire, casualty, public liability, and
business interruption insurance covering Purchaser's business operations, unless
Purchaser is not legally able to maintain business interruption insurance, and
shall purchase and carry insurance covering Purchaser's obligations pursuant to
Section 5G hereof. All policies of insurance shall be written by insurance
companies authorized to do business in the State and shall provide that no
change of coverage shall be effected unless at least thirty (30) days' prior
notice is given to the Authority. Certified copies of all replacement policies
shall be delivered to the Authority not less than thirty (30) days prior to the
expiration of any coverage. The "Authority" shall be named
40
as an "Additional Insured" on all public liability insurance policies maintained
by the Purchaser for Purchaser's Interconnection System and any other facilities
of the Purchaser located on the System, on all business interruption insurance
and all insurance covering Purchaser's obligations pursuant to Section 5G
hereof. The proceeds of business interruption insurance shall be payable
directly to the Authority to the extent of the Purchaser's obligations to
purchase water hereunder.
SECTION 9. Covenants, Representations, and Warrants
A. The Authority shall continuously operate and maintain the System
in an efficient manner in accordance with Prudent Water Supply Practices. The
Authority shall have no liability in the event that the water, which is actually
available to the System is insufficient to permit the Authority to comply with
its obligations hereunder.
B. The Authority shall not enter into any Water Purchase Contract
which would result in (i) Uninterruptible Service called for under all Water
Purchase Contracts to exceed the Maximum Dependable or Safe Yield or (ii) the
water supply called for under all contracts or commitments for water of the
System to exceed the maximum output capacity of the System.
C. The Authority represents and warrants that it has all
41
licenses and permits presently obtainable from any federal, state or local
governmental authority required in order to enter into this Contract and to
provide water to Purchaser as herein set forth.
D. The Authority shall exercise reasonable efforts to execute
Contracts, similar in form and content to this Contract, with all other users of
the System; provided, however, that notwithstanding the foregoing, the Authority
may (i) enter into Contracts for durations other than the term of this Contract
and (ii) enter into Contracts, containing terms which may be inconsistent with
the terms of this Contract, if the Authority determines it to be necessary in
connection with the operation of the System so long as such Contracts do not
increase the Purchaser's obligations hereunder for Debt Service unless the
Purchaser is benefited as a result of the provisions of such Contract. All
Contracts entered into by the Authority shall contain rates and charges for
water as are set forth in the Rate Schedule then in effect.
E. The Purchaser represents and warrants that it has all licenses
and permits from any federal, state or local governmental authority required in
order to enter into this Contract, to divert water from the System in accordance
therewith and to operate the
42
Purchaser's Interconnection System.
F. The Purchaser covenants to (i) maintain in good operating order
and repair the Purchaser's Interconnection System; (ii) charge and collect
taxes, fees and other charges to its residents and customers which, from time to
time together with other funds available to the Purchaser, are reasonably
estimated to be required by the Purchaser to make the payments to the Authority
which are required pursuant to this Contract.
SECTION 10. Events of Default.
Any of the following shall constitute an Event of Default:
If the Purchaser shall (i) fail to make any payment due under this
Contract for a period of more than 15 days after any such payment is due or (ii)
shall fail or be unable to perform, or shall default in the performance of, any
of its obligations under this Contract, and such failure, inability or default
in performance is (A) willful or (B) remains uncured for more than 30 days after
notice thereof is given by the Authority to Purchaser; provided however, that if
such failure, inability or default in performance is incapable of being cured
within such 30 day period, the same shall not constitute an Event of Default so
long as
43
Purchaser commences to cure such failure, inability or default in performance
within such 30 day period and diligently and continuously proceeds to cure the
same.
If an Event of Default has occurred, then the Authority may, without
further notice, take any one or more of the following actions:
(a) Discontinue the supply and delivery of water under this
Contract, including disconnecting Purchaser's Interconnection System from
the System during the period of such default, without altering the
obligation of the Purchaser to make Monthly Water Payments or any other
payment required by the terms of this Contract;
(b) Bring any suit, action or proceeding at law or in equity
necessary or appropriate to enforce any covenant, agreement or obligation
against the Purchaser.
(c) Take any other action permitted by law or equity to enforce its
rights under this Contract and to recover damages for breach thereof, or
(d) Terminate this contract.
SECTION 11. Payments and Notice.
Unless otherwise provided herein, any payment, notice,
44
communication, request, reply or advice herein provided or permitted to be
given, made or accepted by the Authority or the Purchaser to each other shall be
given or be served either by depositing the same in the United States mail
postpaid and registered or certified and addressed to the party to be notified,
with return receipt requested, or by delivering the same to an officer of such
party, or by prepaid telegram when appropriate, addressed to the party to be
notified. Notice deposited in the mail in the manner hereinabove described shall
be conclusively deemed to be effective, unless otherwise stated herein, from and
after the expiration of three days after it is so deposited. Notice given in any
other manner shall be effective only if and when received by the party to be so
notified. For the purposes of notice, the addresses of the Authority and
Purchaser shall, until changed as hereinafter provided, be as follows:
If to the Authority:
New Jersey Water Supply Authority
1851 State Highway 31
Post Office Box 5196
Clinton, New Jersey 08809
Attention: Executive Director
If to the Purchaser:
Middlesex Water Company
1500 Ronson Road
45
P.O. Box 1500
Iselin, NJ 08830-0452
The Authority and Purchaser shall have the right from time to time and at any
time to change their respective addresses by at least fifteen (15) days' written
notice to the other party hereto given in the manner hereinabove set forth.
SECTION 12. Severability.
In the event that any one or more of the provisions of this Contract
shall for any reason be held to be illegal or invalid by a court of competent
jurisdiction, it is the intention of each of the parties hereto that such
illegality or invalidity shall not affect any other provision hereof, but this
Contract shall be construed and enforced as if such illegal or invalid provision
had never been contained herein.
SECTION 13. Incorporation of Rate Schedule and System Rules and
Regulations.
The Rate Schedule and the System Rules and Regulations are hereby
incorporated herein by reference as fully as if herein set forth and all of the
terms and provisions of such Rate Schedule and System Rules and Regulations
shall be part of this Contract and shall be binding upon the Purchaser.
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SECTION 14. Calculations of the Authority.
All meter readings to the extent made by the Authority and all
calculations made by the Authority of amounts due by a Purchaser pursuant to
this Contract, whether based upon meter readings or estimates by the Authority
or meter readings by the Purchaser, shall be valid and binding upon the
Purchaser absent manifest error by the Authority.
SECTION 15. Termination of Existing Contract.
Except (i) for amounts which may presently be due pursuant to the
terms thereof and (ii) as is specifically set forth in this Section 15, this
Contract supercedes the Existing Contract being specifically RBS-2 which is
deemed by the parties hereto to be terminated.
SECTION 16. Binding Effect.
This Contract, when executed and delivered by the parties hereto,
shall be a valid and binding agreement, which shall be governed by and construed
in accordance with the laws of the State. Neither party hereto may assign its
rights or obligations hereunder without the consent of the other party.
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IN WITNESS WHEREOF, the Authority and the Purchaser have caused this
Contract to be duly executed the date and year above first written.
(Authority Seal)
ATTEST: NEW JERSEY WATER SUPPLY AUTHORITY
By:
- ------------------------ ------------------------------
Thomas G. Baxter, P.E.
Henry S. Patterson III
Executive Director
(Purchaser Seal)
ATTEST: MIDDLESEX WATER COMPANY
s/ MF Reynolds By: s/ Dennis G. Sullivan
- ----------------------- ---------------------
Secretary President
Reviewed and Approved As to Form Only:
Peter C. Harvey
Attorney General for New Jersey
By:
------------------------
Helene P. Chudzik
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Deputy Attorney General
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